“Exceptionally High” MicroStrategy Stock Price Is Driven by Debt-Funded BTC Holdings, Says Investment Firm

MicroStrategy’s share price, which is mainly driven by its Bitcoin (BTC) holdings, is “exceptionally high” and “unjustifiable”, argues investment firm Kerrisdale Capital.

Investors have inflated MicroStrategy’s premium due to the company’s BTC holdings. Most of this BTC was purchased through debt financing, equity-linked convertible bonds and ATM equity issuances, the company said in a March 28 analyst note. remark.

Calling the company’s use of leverage to buy more BTC “intelligent” is flawed logic, it added.

Bitcoin ETFs could make MicroStrategy obsolete

The launch of Spot Bitcoin ETFs (exchange traded funds) in the US could reduce the need for investors to trade MicroStrategy shares to gain exposure to Bitcoin, the company added.

MicroStrategy (MSTR) no longer offers investors “a rare, unique way to access Bitcoin,” the note said.

Kerrisdale Capital said MicroStrategy’s “sleepy software analytics business” makes up just 3% of the company’s collective value. Other reasons that argue for the value of MSTR, such as the ability to buy more BTC using the software company’s cash flows, the access to liquidity, the lack of management fees, and how easy it is to trade MSTR are all’ weak’. comment added. Analysts at the investment firm therefore said that they are ‘short shares of MicroStrategy’.

Michael Saylor maintains a positive outlook for the company

MicroStrategy CEO Michael Saylor has consistently expressed confidence in the company’s ability to remain attractive to investors. One thing that gives MicroStrategy an edge over spot Bitcoin ETFs, aside from the fact that it doesn’t charge fees, is the leverage it offers investors, Saylor said in a December interview with Bloomberg TV.

#Bitcoin is better. pic.twitter.com/UkZR7t6UEP

— Michael Saylor⚡️ (@saylor) March 28, 2024

More recently, the CEO also revealed that the company will be rebranded as a “Bitcoin development company.” He called this a ‘natural decision’ on February 12 interview with CNBC, given the success of MicroStrategy’s Bitcoin investment.

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